news

honesty is the best policy in stakeholder reporting

December 2003

Companies that produce ‘warts and all’ reports for their stakeholders are much more likely to win the trust of influential pressure groups, a study strongly suggests.

Failing to mention lapses in performance, major social and environmental challenges and instances of non-compliance were the factors most likely to make non-governmental organizations think a company lacked credibility.

The study of 56 human rights, environment and community-service NGOs by the public relations consultancy Burson-Marsteller found the single biggest influence on groups assessing the value of a company’s reporting practice was whether an independent third party had verified the data.

All but three of the groups, which were mostly US-based, though global in scope, said this was the most important indicator that the information was credible, followed by observance of external standards such as SA8000 (43) and inclusion in socially responsible investment portfolios or indices (42).

Social and environmental labels on products were relatively uninfluential, with only half of NGOs mentioning them, although Burson-Marsteller says that a firm showing commitment in several different ways is more likely to be well-regarded by NGOs.

But producing an unverified report is better than no report at all. Forty-four of the NGOs felt triple bottom line reports were ‘very’ or fairly’ useful. And more than three-quarters ‘think less of Fortune 500 companies if they do not issue them’.

Bennett Freeman, managing director for corporate responsibility at Burson-Marsteller’s US corporate and financial practice, concluded: ‘Metrics matter, but what matters even more is candour and the willingness to acknowledge mistakes. NGOs will be far more willing to recognize progress if companies are ready and willing to acknowledge publicly their mistakes.’

He cited BP, Gap and Shell as leaders at this. ‘It is harder for US companies to acknowledge mistakes than for UK companies,’ he said. ‘They are prouder and it is felt to show weakness to admit mistakes or failures. Yet there is a need to admit wrongdoing.’